Banking Risks, Supervision & Compliance

Description

A banking institution carries risks of very different natures, whose prudential treatment follows distinct logics. This four-day course lays the foundations: identifying the main risk families, understanding how the Basel accords turn them into capital requirements, and locating each actor’s role in the control framework. It is the base layer for the other modules in this area.

Learning objectives

By the end of the course, participants will be able to:

• Identify the main risk categories carried by a banking institution
• Understand the prudential treatment of each risk category
• Locate the architecture of the Basel accords and their European transposition
• Distinguish the roles of the three lines of defence
• Read the main prudential indicators and understand how they are built
• Locate supervisory work and its consequences for the institution

Teaching methods and resources

Structured input illustrated by European institution cases. Simplified calculation exercises, risk mapping workshops, supervisory case studies. Summary diagrams of the Basel accords and a reading grid for prudential indicators. Validation quizzes by risk area.

Course programme

1. Mapping the risks of a banking institution

• Distinguish credit, market, liquidity and operational risk
• Locate conduct, third-party and model risk
• Understand the interactions between risk categories
• Build a usable risk map

Practical work: building a risk map for a given institution profile. Collective ranking of exposures.

2. Locating the prudential architecture

• Trace the construction of the Basel accords and their successive objectives
• Understand how the three pillars fit together
• Locate the European transposition and its timetable
• Distinguish the standardised approach from internal approaches

Practical work: guided reading of a published institution’s capital structure. Identification of the main components.

3. Understanding capital requirements

• Build risk-weighted assets
• Distinguish capital tiers and their quality
• Locate the buffers and the conditions for using them
• Understand the effect of a commercial decision on requirements

Practical work: simplified calculation of the effect of new lending production on risk-weighted assets and the solvency ratio.

4. Organising the control framework

• Allocate responsibilities across the three lines of defence
• Locate the risk function’s role and its independence
• Organise the escalation and treatment of limit breaches
• Document the framework so that it is auditable

Practical work: critical review of a control framework described in a case. Identification of organisational weaknesses.

5. Locating supervision and its effects

• Understand the supervisory review process
• Locate stress testing exercises and how they are used
• Handle a remediation request
• Anticipate regulatory developments in preparation

Practical work: analysis of an anonymised supervisory report. Construction of a prioritised remediation plan.

Description

Credit risk is controlled at three moments: at origination, during the life of the loan, and when the first signs of difficulty appear. This three-day course covers all three, on both retail and corporate portfolios, with particular attention to the early detection of over-indebtedness.

Learning objectives

By the end of the course, participants will be able to:

• Assess the risk of a retail or corporate counterparty
• Locate rating methods and their limits
• Monitor a portfolio and detect deterioration before arrears appear
• Identify over-indebtedness situations and address them early
• Calibrate a prevention arrangement proportionate to the portfolio
• Locate provisioning and its effect on earnings

Teaching methods and resources

Methodological input followed by exercises on real anonymised files. Case studies of counterparties in difficulty, rating exercises, early detection workshops. Counterparty analysis grid and warning signal matrix. Peer exchange between participants.

Course programme

1. Assessing risk at origination

• Analyse the repayment capacity of a retail and a corporate borrower
• Locate collateral and its real value in the event of default
• Understand how a score is built and its limits
• Handle files that fall in the uncertain zone

Practical work: analysis of three origination files, including one borderline case. Reasoned decision and associated conditions.

2. Monitoring the portfolio

• Organise the periodic review of counterparties
• Identify deterioration indicators before arrears appear
• Handle concentration on a counterparty, a sector or a region
• Measure portfolio quality over time

Practical work: analysis of a portfolio’s evolution over three financial years. Identification of pockets of deterioration.

3. Detecting and preventing over-indebtedness

• Spot the behavioural signals that precede difficulty
• Distinguish temporary difficulty from structural insolvency
• Conduct the conversation with a client in difficulty
• Build a sustainable restructuring solution

Practical work: role play of an interview with a client showing over-indebtedness signals. Debrief on how the exchange was conducted.

4. Handling default

• Locate the definitions of default and their consequences
• Understand provisioning and its effect on earnings
• Arbitrate between restructuring, recovery and disposal
• Document the decisions taken

Practical work: treatment decision on three defaulted files with contrasting profiles, with justification.

5. Steering the framework

• Define the credit policy and its limits
• Organise lending delegations and their control
• Measure the effectiveness of the prevention arrangement
• Report on portfolio quality to governing bodies

Practical work: revision of an existing delegation grid. Presentation of the proposed changes and their rationale.

Description

Liquidity is the risk that kills fastest: a solvent institution can disappear in days for want of funding. This three-day course covers liquidity management tools and asset-liability management, including regulatory ratios, stress scenarios and the funding decisions that follow from them.

Learning objectives

By the end of the course, participants will be able to:

• Locate an institution’s liquidity position and its drivers
• Understand how the regulatory liquidity ratios are built
• Analyse the interest rate and liquidity gaps of a banking balance sheet
• Build a stress scenario and draw the consequences from it
• Locate the instruments for hedging interest rate risk
• Organise the asset-liability management framework and its governance

Teaching methods and resources

Technical input followed by exercises on simplified balance sheets. Gap calculations, stress scenario construction, liquidity crisis case studies. Gap calculation templates and a scenario construction grid. Peer exchange between participants.

Course programme

1. Understanding the liquidity of a banking balance sheet

• Locate funding sources and their respective stability
• Distinguish market liquidity from funding liquidity
• Identify off-balance-sheet commitments that consume liquidity
• Understand contagion mechanisms in periods of stress

Practical work: analysis of the funding structure of two institutions with opposite profiles. Identification of vulnerabilities.

2. Building and reading the regulatory indicators

• Understand how the short-term liquidity ratio is built
• Locate the stable funding ratio and its horizon
• Identify the run-off assumptions used and their significance
• Interpret a gap between the regulatory indicator and internal management

Practical work: simplified calculation of the liquidity ratios on a given balance sheet, then analysis of the effect of a change in deposit structure.

3. Analysing the gaps

• Build a maturity schedule of assets and liabilities
• Calculate liquidity and interest rate gaps
• Handle items with no contractual maturity
• Locate run-off conventions and their sensitivity

Practical work: construction of a gap profile on a simplified balance sheet, then sensitivity analysis to the conventions chosen.

4. Building a stress scenario

• Define idiosyncratic and systemic stress scenarios
• Calibrate assumptions for withdrawals and market closure
• Measure the institution’s survival under each scenario
• Build the associated contingency funding plan

Practical work: construction of a stress scenario and calculation of the survival horizon. Presentation of the remediation measures identified.

5. Organising asset-liability management

• Locate the instruments for hedging interest rate risk
• Organise the asset-liability committee and its decisions
• Define limits and their monitoring
• Report the liquidity position to governing bodies and to the supervisor

Practical work: simulation of an asset-liability committee deciding on a hedge for a given rate position. Debrief on the argument made.

Description

Digital assets have changed the way funds move: near-instant transfers, multiple intermediaries, pseudonymous addresses. For a bank as for a crypto-asset service provider, anti-money laundering and counter-terrorist financing must adapt to these features without giving up its principles. This three-day course sets out the applicable framework, from the FATF Recommendations to MiCA, the Transfer of Funds Regulation and the new EU AML/CFT package, and builds an operational risk-based approach step by step.

Learning objectives

By the end of the course, participants will be able to:

• Distinguish the main categories of digital assets and the players that serve them
• Position the applicable AML/CFT framework: FATF, MiCA, Transfer of Funds Regulation, EU AML/CFT package
• Identify money laundering and terrorist financing typologies specific to digital assets
• Build a risk classification covering customers, products, channels and addresses
• Apply due diligence to transfers, including the travel rule
• Organise the detection, analysis and reporting of suspicious transactions

Teaching methods and resources

Regulatory input illustrated with real, anonymised cases. Guided reading of blockchain transaction traces, risk classification workshops, suspicious activity reporting case studies. Risk assessment grid and red-flag matrix specific to digital assets. Experience sharing between participants.

Course programme

1. Understand the digital asset ecosystem

• Distinguish crypto-assets, asset-referenced tokens, e-money tokens and central bank digital currencies
• Position the players: issuers, service providers, trading platforms, hosted and self-hosted wallets
• Understand how a blockchain transaction works and what it makes traceable
• Identify the institution’s points of contact with digital assets

Practical work: mapping the direct and indirect digital asset flows of a given institution. Identification of exposure points.

2. Position the regulatory framework

• Trace the FATF Recommendations applicable to virtual assets
• Position the MiCA Regulation and the regime for crypto-asset service providers
• Understand the obligations of the Transfer of Funds Regulation as applied to crypto-assets
• Anticipate the new EU AML/CFT package and the role of AMLA

Practical work: comparative reading of the obligations of a credit institution and a crypto-asset service provider. Identification of the gaps to close.

3. Assess the risks

• Identify typologies: mixers, chain hopping, unregulated platforms, ransomware, investment fraud
• Build a risk classification by customer, product, channel and geography
• Integrate address and blockchain analytics into the assessment
• Calibrate a risk-based approach proportionate to the business

Practical work: building the risk classification of an institution exposed to digital assets. Group debrief and arbitration of risk levels.

4. Apply due diligence measures

• Conduct customer due diligence on a digital asset holder or a platform
• Implement the travel rule on crypto-asset transfers
• Handle transfers involving self-hosted wallets
• Apply asset freezing measures and sanctions screening

Practical work: processing five incoming and outgoing transfers with contrasting profiles. Reasoned decision: execute, request further information or reject.

5. Detect, report and steer

• Configure monitoring scenarios suited to digital assets
• Analyse an alert and document the decision
• Draft a usable suspicious activity report
• Report on the framework to governing bodies and the supervisor

Practical work: analysing an alert from anonymised transaction traces, then drafting a suspicious activity report. Debrief on the quality of the reasoning.

Description

Payment fraud has shifted: fraudsters bypass technical controls less and manipulate customers themselves more. Fake bank advisers, fake suppliers, CEO fraud: the transaction is authenticated, but it is not intended. This three-day course covers the whole framework, from fraud mapping to steering, including the European regulatory framework, prevention built into customer journeys and real-time detection.

Learning objectives

By the end of the course, participants will be able to:

• Identify the main fraud typologies by payment instrument
• Position the regulatory framework: strong authentication, liability and refunds, instant payments
• Measure the institution’s exposure from its own fraud data
• Design prevention measures built into customer journeys
• Organise real-time alert detection and handling
• Steer the framework and report on it to governing bodies

Teaching methods and resources

Methodological input illustrated with real, anonymised fraud cases. Mapping workshops, analysis of customer complaints, time-boxed alert handling. Fraud scenario matrix and analysis grid for disputed transactions. Experience sharing between participants.

Course programme

1. Map payment fraud

• Distinguish impersonation fraud, manipulation fraud and internal fraud
• Position typologies by payment instrument: card, credit transfer, instant transfer, direct debit, cheque
• Understand social engineering scenarios: fake bank adviser, fake supplier, CEO fraud
• Measure the institution’s exposure from its own fraud data

Practical work: mapping an institution’s fraud from anonymised statistics. Ranking scenarios by frequency and impact.

2. Position the regulatory framework

• Understand PSD2 strong customer authentication requirements and their exemptions
• Position the liability and refund regime for disputed transactions
• Understand the obligations of the Instant Payments Regulation, including verification of payee
• Position statistical fraud reporting and upcoming European developments

Practical work: analysing three customer complaints about disputed transactions. Reasoned decision on the refund.

3. Prevent fraud

• Calibrate strong authentication to the risk of the transaction
• Secure onboarding and changes to bank details
• Raise customer and staff awareness of manipulation scenarios
• Build fraud prevention into journey design from the start

Practical work: critical review of an online payment journey. Identification of weaknesses and corrective measures.

4. Detect and respond

• Configure real-time detection rules and models
• Balance detection rate, false positives and customer experience
• Handle an alert: blocking, customer contact, recall of funds request
• Coordinate action with other institutions and the authorities

Practical work: time-boxed handling of six alerts with contrasting profiles. Debrief on the decisions taken and their justification.

5. Steer the framework

• Define fraud indicators and their alert thresholds
• Link fraud, AML/CFT and operational risk
• Organise governance and escalation to governing bodies
• Document the framework for internal control and the supervisor

Practical work: building a fraud steering dashboard. Presentation to a simulated committee.

Description

Trading activities expose a bank to losses that can materialise within hours: a sharp market move, a counterparty default, an unauthorised position. Controlling them rests on three pillars: reliable risk measures, a limit system that is respected, and control functions independent of the front office.

This three-day course follows a market risk from the moment the desk takes it to its presentation to the risk committee. Participants calculate the main indicators themselves in a spreadsheet, handle realistic incidents and place each practice in the European prudential framework, including the Fundamental Review of the Trading Book (FRTB).

A clear scope

The course covers the trading book and counterparty risk on derivatives. Interest rate and liquidity risk in the banking book are covered by the Liquidity Risk & Asset-Liability Management (ALM) course (Réf. HA-ALM).

Learning objectives

By the end of the course, participants will be able to:

• Map the risks of a market activity and the role of each function, from front office to risk control
• Calculate and interpret sensitivities, VaR, Expected Shortfall and stress test results
• Design a limit system and handle a breach through an escalation procedure
• Measure counterparty exposure on derivatives and the effect of netting and collateral
• Place the applicable prudential requirements, including FRTB, and internal control expectations
• Spot the warning signs of unauthorised trading

Teaching methods and resources

Short presentations illustrated by documented market incidents, spreadsheet calculations on historical price series, and role plays between front office, risk control and senior management. Materials provided: VaR and Expected Shortfall workbooks, limit policy template, standard escalation procedure, warning-sign checklist and a market risk glossary.

Course programme

1. Mapping the risks of market activities

• Place the products traded: equities, rates, FX, commodities and derivatives
• Distinguish the functions: front office, middle office, back office, risk control, compliance
• Identify the risks: market, counterparty, market liquidity, operational, model
• Understand how daily P&L is produced and explained

Practical work: risk mapping of a fictitious trading floor with a rates desk and an FX desk.

2. Measuring market risk

• Calculate sensitivities: delta, gamma, vega, basis point value
• Estimate VaR using historical, parametric and Monte Carlo methods
• Complement VaR with Expected Shortfall and stress tests
• Check model quality through backtesting

Practical work: calculating historical VaR and Expected Shortfall on a bond and FX portfolio, then backtesting over 250 days.

3. Setting limits and controls

• Build the limit framework: VaR, sensitivities, stop-loss, notional, concentration
• Organise daily monitoring, breach handling and escalation
• Carry out independent price verification and valuation control
• Spot the signs of unauthorised trading: cancellations, unexplained gaps, leave not taken

Practical work: handling a limit breach and an unexplained P&L gap, from alert to senior management decision.

4. Managing counterparty risk on derivatives

• Measure exposure: mark-to-market and potential future exposure
• Reduce exposure: netting agreements, collateral, margin calls
• Place central clearing and bilateral margin requirements under EMIR
• Understand the SA-CCR standardised approach and credit valuation adjustment (CVA)

Practical work: calculating the exposure of an interest rate swap portfolio before and after netting and collateral.

5. Prudential framework and governance

• Place FRTB: trading/banking book boundary, standardised approach, internal models and the P&L attribution test
• Link CRR requirements with internal control under the French Order of 3 November 2014
• Define the role of the risk management function and its committees
• Produce reporting that is useful to senior management and the supervisor

Practical work: building the market risk dashboard presented to the risk committee, followed by a group debrief.